Got your eye on a luxury car that’ll make your mates jealous? Or perhaps something that’s a little more fuel-efficient and environmentally friendly? Today we’ll run you through a new tax change that could help you buy something a little more la-de-da.
Have you heard about the luxury car tax (LCT) threshold?
Basically, if you buy an imported car with a GST-inclusive value that’s above the LCT thresholds, the tax man slugs you with an extra 33% tax on the exceeded amount (minus the GST component).
But the good news is the LCT thresholds have just been given a pretty decent boost – the third one in a row.
From July 1, the threshold has been boosted by $5,257 to $84,916 for fuel-efficient vehicles, and by $2,697 to $71,849 for other regular vehicles (all inc. GST).
According to the ATO, a fuel-efficient vehicle is one with fuel consumption that doesn’t exceed 7.0L/100km on the combined cycle.
How does the LCT threshold work?
Ok, so this threshold boost isn’t just good for people wanting to buy a vehicle under the threshold.
It’ll also make cars above the threshold more affordable, too.
Let us explain.
Say you want to buy a Tesla Model 3 Performance, which has a GST-inclusive price of $93,325.
Under last financial year’s LCT threshold of $79,659 for fuel-efficient vehicles, you would have paid a LCT tax of $4,100 (exceeds LCT threshold by $13,666, subtract GST component paid, multiply by 33% = $4,100 LCT).
But now that the LCT threshold for fuel-efficient vehicles has been boosted to $84,916, you would only pay LCT of $2522 ($8,409 – GST component paid x 33% = $2522).
And if you wanted to avoid paying the LCT altogether, you could instead purchase a Model 3 Long Range, which has a GST-inclusive price of $81,725.
That means this financial year, it’s below the LCT threshold, but last year you would have been slugged with a LCT of $620.
Get in touch today to explore your finance options
If you’ve got your eye on a particular vehicle – luxury or not – and you’d like to explore some finance options to help purchase it, give us a call today.
We can help you find the right loan for your circumstances, depending on whether the vehicle is for business, personal use, or a mix of both!